In 2018 the partners of DSK established, through research and client interviews, the additional services their clients required to reach their goals and be more successful. They recognized a need for leadership assistance to help business owners achieve their family’s long-term strategic goals.

“We knew that Kevin was successfully delivering Outsourced CFO Services to his clients that our clients needed,” says Paul Drouillard, Partner of DSK. “His clients were thriving as a result of his Outsourced CFO services, and that’s what we wanted for our clients. He went on to say, “We’ve found a way to bring our two organizations together in DSK Profitable Wisdom LLP and strengthen both organizations.” Kevin Ballantyne states that “The merging of the two entities brings a great deal of strength to the core of the business. Together, we’ll refine Profitable Wisdom’s services and offerings to help clients grow sales, profits, cash flow, and shareholder value.”

With the formation of DSK Profitable Wisdom LLP, DSK clients will continue to benefit from highly valuable professional accounting and bookkeeping services and with the addition of DSK Profitable Wisdom LLP, also have the opportunity to solve issues related to the achievement of their success.

DSK is a full-service chartered professional accounting firm supplying clients in Waterloo Region and beyond with accounting, bookkeeping, assurance, and specialized business transaction advice. DSK also provide tax planning and tax return preparation covering both Canadian and US taxes.

Often, after many years of running a business, business owners no longer feel the freedom that propelled them to open up shop in the first place. The burden of the business, customers relying on the owner to work in the business, and the stress of generating enough work and cash to keep staff busy and paid feels a long way from free. Is this you?

If you’re like most business owners, you’re stuck in a rut, spending 60 to 80 hours a week working in a business that is paying you less than you deserve and generating little or no profit. Of course, you can’t keep doing what you have always done and expect different results.

That is where the right outsourced CFO can help. The ideas listed below are just the tip of the paper pile and accompanying to-do list that can be taken care of by an outsourced CFO.

Correct & Useful Financial Statements

For many business owners, monthly financial statements (if they produce them at all) consist of a single column of numbers with no comparisons. The totals swing wildly month to month, from substantial loss to large profit, with the year-end statements being a surprise. If you find yourself in this position, an outsourced CFO can give you control of your month-end reporting and set up reports that actually tell you something useful.

A Plan to Increase Profits

Increasing profits doesn’t happen by monitoring wildly fluctuating monthly reports and hoping for better next time. In fact, in my experience, most small businesses don’t have plans and are operating at less than optimal profitability. An outsourced CFO will develop a plan that will increase profits and can be implemented in a sustainable way.

Create a Financial and Cash Flow Forecast

This will help you meet all obligations in the near and distant future. No more panicking because a client didn’t pay on time or because you’re waiting for a cheque to clear the bank. This forecast will give you actions that will produce the desired results.

Develop Processes That Give You More Time

Does this sound like a dream? Perhaps. But it’s a realistic one. An outsourced CFO will develop processes with you that will help your business run efficiently with less involvement from you, the owner. Yes, you can say it: vacation! (Or perhaps semi-retirement? Time with your family? All of the above?)

Determine the Value of the Business and Increase Its Value

There will come a day when you realize it’s time to move on. An outsourced CFO will help you take steps to increase the value of your business to the shareholder so that the company is sale-able and the value is maximized when it’s time to sell. If you don’t know the value of your business now, moving on will be a difficult journey and you may discover that your business is worth a lot less than you thought.

A Sounding Board for Difficult Decisions

Too many issues aren’t for employees’ ears. But when you need to discuss increasing profitability, retirement, selling, even employee pay rates, an outsourced CFO is there for you. This person will have both the necessary financial knowledge and the key insights into yourbusiness, so the advice you get will be beneficial to you and your business.

So, what does all of this look like in real life? Here is what one of our clients said:

In the first four months of being our outsourced CFO, Kevin Ballantyne from Profitable Wisdom provided us with accurate and timely comparative financial statements that included comments and ratios, helping us understand the financial performance of the company better than before. He was also able to close our year-end financials and provide supporting documents to our external accountants within a month of our year-end. Kevin completed a 2-year financial forecast including cash flow projects, helped to straighten out our HST filing, trained our accounting clerk on month-end procedures, analyzed the potential return on investment for an expensive piece of machinery and helped to save money on foreign exchange. Kevin also created a detailed fixed asset ledger, documented our office processes and reviewed ERP systems for future conversion.— Bill McCann, President of McCann Redi-Mix

Our purpose at DSK Profitable Wisdom is to guide businesses and their owners to success. Success is defined by you, and we will help you get there. Contact us today at info@profitablewisdom.com or (226) 791-0374 and arrange a no-obligation conversation.

This past year, the owner of a family business died and the general manager quit. My role? To keep the company operating and prepare to sell it. The business had been very dependent on the owner and there was no plan for business owner disruption, which made my role very difficult. Would your business survive if you died or had a serious health issue which prevented you from working? Does your business have a solid transition plan? If not, you need to read this.

No Business Owner Disruption Plan? You’re Not the Only One

You are certainly not alone if you don’t have a transition plan which should include a business owner disruption plan. According to a recent study in the US by Wilmington Trust, only 58% of small business owners have one, and I believe if you ask those owners, most will say that it isn’t written down, which isn’t truly a plan.

So, let’s discuss business owner disruption planning. Because so many older business owners haven’t done business transition planning, and certainly not business owner disruption planning, I foresee that there will be many more situations where the owner’s family will have to bring in someone to keep the company operating and potentially get it ready to sell.

Planning Your Business Without You

Ideally, your business would continue to grow and thrive without you whether your absence from the business was planned or not. Doing this is one of the ways to increase the value of your business and make it more saleable.

(Read “Major Part of Increasing Value Is Decreasing Risk” in the December 2018 issue of The Wise Business Owner Gazette – go to www.profitablewisdom.com to subscribe and receive this issue immediately.)

A plan to address business owner disruption should do the following:

Highlight your guiding principles and philosophy that you follow in conducting business so that those running the business without you can follow these same principles

Name a successor to run the business and if this successor couldn’t fulfill this role, the plan should provide for interim management

Outline the outside support that you recommend your successor seek

List the external relationships that should be maintained in your absence

Provide the location of important documents

Create a step-by-step guide that outlines what to do when the owner is absent

After you have created the plan, communicate it to everyone who could potentially be affected and describe to each person their role when this disruption occurs. Review this plan frequently. Even better, give it a test drive by going on a 3- to 6-month sabbatical from the business.

Start Your Business Owner Disruption Plan Today

Business owner disruption planning is a key component of business transition or exit planning because sometimes events don’t always go according to plan. Many articles have been written in the last ten years on business transition, but it seems that most business owners are still not heeding this advice. I explain more about business transition planning and business owner disruption planning in my course, Finance for the Non-Financial Leader. Sign up for the course today.

If you have any questions about Finance for the Non-Financial Leader or would like help with your business transition plan or your business owner disruption plan, contact me at info@profitablewisdom.com or (226) 791-0374 and arrange a no-obligation conversation.

Each year, owners of small and medium-sized businesses receive annual reports from their CPA which are often long after the year ended, difficult for them to understand, don’t help them make business decisions, don’t help to plan for profit, or reflect what’s working or not working in their business. In this article, I’ll share with you five actions you can take that will help you plan for profits that you will be able to put your in hands.

Does this sound familiar to you?

Almost six months after your company’s year-end you met with your CPA to review last year’s financial statements. It was so long ago that you couldn’t remember the details and from what you did remember, the financial statements didn’t look at all like the reports your bookkeeper gave to you 30-days after the year-end.

When you looked at the statements from your CPA, they didn’t mean very much to you. You skipped over the Balance Sheet because you didn’t understand it and went right to the Income Statement where you saw that your sales were higher or lower than last year and you could see if you made any profit.

If there was a profit, you probably asked yourself, “where is that money?” “Shouldn’t I be able to put my hands on it?”

One business owner I know asked her CPA, “How do I increase my business profits?” He answered, “increase sales.” This flippant remark made her feel dumb because it seemed like such an obvious answer. However, the glib comment was unhelpful, caused resentment and wasn’t even correct because increasing sales doesn’t necessarily cause profits to increase.

The CPA firm isn’t at fault in most cases.

The time between November and the end of March, (tax time), is the busiest part of the year for your CPA. So busy in fact, that your CPA doesn’t have much time to really get to know your business or properly advise you. In addition, most businesses are slow to get their year-end information to their CPA, causing a large backlog to form close to filing deadlines.

Is there a solution that will help me plan for profits?

How can you get timely, accurate and understandable information that will help you make sound decisions, truly understand what is working and what is not working in your business, and be in better control of annual profits?

Here are five steps you can take to plan your profits, measure business performance through the year, and help you to reach your targets.

Create a monthly profit forecast and incorporate it into your financial statements. Be sure to include all the activities and resources needed to achieve the projection. You may need to understand where your business is making profits and where it isn’t. If your initial forecast doesn’t end up with your desired profit, then you will need to adjust expenses, sales, staffing and resources in the forecast plan to hit your targets. (Read “Determining Where Your Profits Are Made” in the October 2018 issue of The Wise Business Owner Gazette – go to profitablewisdom.com to subscribe and receive immediately)

Create financial statements that include the monthly forecast and be sure to include financial ratios to indicate financial health and progress in reaching the targets you set.

Have your bookkeeper, or with the help of a Part-time CFO, make journal entries to your monthly statements to record sales and related expenses in the same month and accrue expenses like depreciation and prepaid expenses. Adopt a policy and develop processes whereby accurate statements are delivered to you no more than one week after each month-end.

Request that your CPA deliver your financial statements within one month of your year-end. In steps one, two and three, you are now receiving timely and accurate monthly financial information, which you can pass on to your CPA at year end. There will be very little work for your CPA, and you will get it from them much sooner. You may even negotiate a lower rate.

Set aside your monthly profits in a separate bank account so that you can indeed put your hands on it and give yourself a much-deserved reward. Because you have done steps one through four above, you will be more likely to achieve your targets and your planned profits.

If you have any questions about Finance for the Non-Financial Leader or would like help implementing these five steps in your business, contact us at info@profitablewisdom.com or (226) 791-0374 and arrange a no-obligation conversation.

If you’re trying to figure out what your business might be worth, it’s helpful to consider what acquirers are paying for companies like yours these days.

A little internet research will probably reveal that a business like yours trades for a multiple of your pre-tax profit, which is Sellers Discretionary Earnings (SDE) for a small business and Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA) for a slightly larger business.

Obsessing Over Your Multiple

This multiple can transfix entrepreneurs. Many owners want to know their multiple and how they can jack it up. After all, if your business has $500,000 in profit, and it trades for four times profit, it’s worth $2 million; if the same business trades for eight times profit, it’s worth $4 million.

Obviously, your multiple will have a profound impact on the haul you take from the sale of your business, but there is another number worthy of your consideration as well: the number your multiple is multiplying.

How Profitability Is Open To Interpretation

Most entrepreneurs think of profit as an objective measure, calculated by an accountant, but when it comes to the sale of your business, profit is far from objective. Your profit will go through a set of “adjustments” designed to estimate how profitable your business will be under a new owner.

This process of adjusting—and how you defend these adjustments to an acquirer—is where you can dramatically spike your company’s value.

Let’s take a simple example to illustrate. Imagine you run a company with $3 million in revenue and you pay yourself a salary of $200,000 a year. Further, let’s assume you could get a competent manager to run your business as a division of an acquirer for $100,000 per year. You could safely make the case to an acquirer that under their ownership, your business would generate an extra $100,000 in profit. If they are paying you five times profit for your business, that one adjustment has the potential to earn you an extra $500,000.

You should be able to make a case for several adjustments that will boost your profit and, by extension, the value of your business. This is more art than science, and you need to be prepared to defend your case for each adjustment. It is important that you make a good case for how profitable your business will be in the hands of an acquirer.

Some of the most common adjustments relate to rent (common if you own the building your company operates from and your company is paying higher-than-market rent), start–up costs, one-off lawsuits or insurance claims and one-time professional services fees.

Your multiple is important, but the subjective art of adjusting your EBITDA is where a lot of extra money can be made when selling your business.